Flood insurance premiums may sink South Florida before the rising sea does

Long before the invading sea reaches our homes, it could upend our region’s economy. And soon.

In just two or three years, Congress may change the way it sets rates in FEMA’s National Flood Insurance Program (NFIP) to reflect more realistic assessments of risk, including the expected impacts of sea-level rise.

According to the chair of Miami’s Sea Level Rise Committee, FEMA officials believe the largest provider of flood insurance in the United States will be aligning the cost of premiums much closer to the heightened risks of flooding. And that the changes will come sooner than many expect.

Indicating that change is in the air, a FEMA spokesperson said Friday that the agency plans to announce a risk-rating “redesign” next year that “will allow us to better reflect the resilience and vulnerability of homes and other structures covered under the NFIP.” It would begin in 2020.

“This is a big game-changer,” Wayne Pathman says. “South Florida is ground zero, in many studies, for the economic impact of sea-level rise. So I’ve said many times that the tip of the spear of this economic issue is insurance.”

Rather than focusing on how high the sea level will be in 2060 or 2100, more concern should be on the economics, Pathman told The Palm Beach Post Editorial Board. “Because those things are already changing.”

The move to so-called “risk-based assessments” will likely jack up the cost of flood insurance to as much as wind-storm insurance “or more” in the next five to 10 years, said Pathman, a Miami attorney who is also chair of the Miami Beach Chamber of Commerce. He sees rates rising 25 percent to 60 percent in the near term, and more after that.

In high-risk areas — and much of Florida is a high-risk area — real estate will get more expensive. The higher costs will ripple through banking, bonding and taxation. It might not be long, Pathman warns, before “30-year mortgages will be a thing of the past.”

Put it together, and investors could start bailing on South Florida long before the waters arrive. “Once risk-based assessment takes hold, it sends a message to the world that this place is too risky,” Pathman said at a community meeting reported by WLRN.

As harsh as the consequences will be for our region, there are sound reasons to reform the federal program, which was created 50 years ago to help people affordably repair their homes after flooding. It is now $24 billion in debt and its authorization to issue new policies is set to end on July 31.

The program’s finances have been battered as floods have become more frequent, damage more extensive, and about 20 percent of the 5 million policyholders pay artificially-low premiums that don’t reflect the true likelihood of flood damage.

Against all common sense, those unrealistic rates encourage development in flood-prone zones. More than 30,000 properties have flooded an average of five times each and been rebuilt each time through the NFIP. Some of these properties have been flooded more than 30 times.

At present, the NFIP ties its rate-setting to floodplain maps drawn up by FEMA. But the maps aren’t all that precise. And because the maps are based on historical data, they don’t take into account the heavier storms we’ve been seeing in recent years, let alone predicted increases in the sea level.

The most logical reforms would match premiums more realistically to each property’s flood risk. This would require better maps and more precise assessments. Any reform must also include financial help to ease the sticker shock for lower-income homeowners.

No place will be more susceptible to higher flood-insurance rates than Florida. As the Union of Concerned Scientists recently reported, 64,000 homes statewide will be vulnerable to chronic flooding by 2045 (“chronic” defined as 26 flood events per year). That’s not even 30 years away. These are risk factors that insurers and global investors are already discussing.

It sounds grim. But there are things we can do to minimize the economic threat.

Pathman urges us to think back to 1992’s Hurricane Andrew. That disaster could have been catastrophic for insurance rates. But it wasn’t. Why? Because Florida passed the nation’s most stringent building codes. Today’s buildings have a greatly reduced risk of falling apart in a hurricane. The insurance industry has taken note. Premiums haven’t soared.

By the same token, if we can demonstrate that we are reducing the risk of property loss from increased flooding, insurers will restrain insurance rates and investors will keep believing in South Florida. In other words, we apply the lessons learned from Hurricane Andrew to sea-level rise.

To do that, Pathman is advocating that Miami create a 40-year action plan, as soon as possible, to show the investment and insurance worlds that the city is doing all it can to tamp down the risks of future damage.

Ideas include a high-resolution map of the city to help developers and homeowners evaluate and adapt to sea-level risk; zoning code modifications; a revised stormwater master plan that factors in rising seas; guidelines and incentives encouraging designers to build more resilient structures; economic and catastrophe modeling; a strategy for where seawalls could be effectively used as barriers.

Miami can’t act alone, of course. Its government must join with other local governments, because rising water doesn’t respect municipal or county boundaries. The business community must be invited in, as well.

This sounds like a smart policy for all South Florida. If we don’t want insurance rates to dictate our economic future, we must show the markets that we intend to adapt our environment to the more watery world that’s coming.

We’ve done it with hurricanes. We can do it with rising water.

“The Invading Sea” is a collaboration of four South Florida media organizations — the South Florida Sun Sentinel, Miami Herald, Palm Beach Post and WLRN Public Media.

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About The Project

The Invading Sea is a collaboration by the editorial boards of the South Florida Sun Sentinel, Miami Herald and Palm Beach Post —
with reporting by WLRN Public Media —
to address the threat South Florida faces from sea-level rise. We want to raise awareness, amplify the voice of our region and create a call to action that can't be ignored. Read More